The expected inflation rate until the end of this year, 2021, is 2% in the US, and 12% in Mexico, respectively.The current spot exchange rate as of Feb. 17, 2021, between Mexican peso (MP) and the US dollar is MP 20.19 / $.1 (approx. 10 months later), based on the above information? 

1. Which theory of the FX rate determination do you use for your forecasting?

Answer rating: 100% (QA)

Based on the information provided regarding the expected inflation rates in the US 2 and Mexico 12 a... View the full answer